[Recorded by Electronic Apparatus]

Tuesday, October 8, 1996

.1832

[English]

The Chairman: I declare this session of the Standing Committee on Canadian Heritage open.

[Translation]

The Committee on Canadian Heritage is pursuing its study on Bill C-32 and is continuing to hear witnesses.

[English]

Tonight from the Federation of Canadian Municipalities we have with us Mr. Michael Roche, director of policy and programmes, and Ms Robbin Tourangeau, policy analyst. Mr. Roche, the floor is yours.

Mr. Michael Roche (Director of Policy and Programmes, Federation of Canadian Municipalities): Thank you very much, Mr. Chairman.

The Chairman: You know we have 45 minutes, and the shorter your presentation is, the more time there will be for members to interchange with you, so it's up to you.

Mr. Roche: Thank you, Mr. Chairman and members of the committee, for giving us the chance to appear before you today on the matter of Bill C-32. My name is Michael Roche. I am the director of policy and programmes for the Federation of Canadian Municipalities. Accompanying me is Robbin Tourangeau, who is FCM's policy analyst responsible for community development issues.

The Federation of Canadian Municipalities has been recognized since 1937 as the national voice of municipal governments. It represents the interests of all municipalities on policy and program matters within federal jurisdiction that bear directly on the affairs of Canada's municipal governments. FCM membership includes 17 provincial and territorial municipal associations and more than 600 individual municipal governments representing more than 20 million Canadians. These include Canada's largest cities as well as small urban and rural communities.

At the beginning of last April FCM's president wrote to member municipalities - this was before the bill was tabled - drawing their attention to anticipated legislation proposing copyright payments to artists and recording companies for public performance of their recorded music. At stake was whether the addition of neighbouring rights to existing copyright payment legislation would be of concern to municipalities.

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In their responses, Canada's smaller municipalities expressed clearly the view that such changes would have a negative impact upon their communities. Principally, they were concerned about the effects such payments would have on an already cash-strapped local broadcasting industry and on municipalities' ability to hold public events such as community skating and aerobics classes. Local businesses such as bars, hotels, and restaurants would also be affected.

In the past five years the radio industry has lost more than $180 million. Its pre-tax profit in 1995, after massive restructuring and cost cutting, was only $3.8 million out of revenues of $780 million. Neighbouring rights legislation could cost the industry as much as $8 million. If radio stations are required to compensate record companies and recording artists every time a record is played on radio, it will substantially increase the operating costs for local broadcasters and could have a devastating effect on their precarious financial position.

Municipalities would be greatly affected by local radio station closures or cutbacks in programming. Local broadcasters are integral to the social fabric of our communities. They act as employers, as promoters of the local arts, and as essential community information providers. Their loss would mean a loss of jobs, a reduction in the coverage of local news, and lost support for local initiatives and activities. It will also affect the key role local broadcasters have played in fostering local talent across Canada. Radio stations are often the only source of local daily news, and they're a focus for community activities.

For municipal governments, radio can be the most effective way to reach the community. Communities rely on local radio for everything from school bus cancellations to the latest information on local issues. Given the critical importance of a vibrant and strong broadcasting industry to Canada's small municipalities, FCM feels that any proposed changes to the Copyright Act should take into consideration the impact upon local radio stations.

We ask that no action be taken that would negatively affect the survival of local radio in Canada. In this regard, we welcome the change that exempts the first $1.25 million of radio station revenues. This change is of particular benefit to small radio stations, but we would still prefer to see a total exemption. We know too that the $1.25 million exemption is not tied to any inflation index and therefore it would erode over time.

Municipalities are currently required to pay copyright fees to SOCAN for recorded music played at events such as hockey games, fitness and aerobics classes, parades, conferences, festivals, dances, and community skating. This is significant to small municipalities in particular. For instance, in a small community there may be 20 participants attending public skating. The municipality has to pay for the overhead of running and maintaining the skating rink, pay the salaries of the workers, and keep admission fees low to ensure that the people can participate in public skating.

I want to table the next sentence in the written part of the brief referring to the way the existing tariff structure works, and I want to say simply that the existing tariff structure can take a large portion of the revenue from an activity such as this. FCM is concerned that any new tariffs will exacerbate the situation and affect the ability of small municipalities to hold public events. FCM is also concerned that the proposed legislation will affect the events held by local service and community organizations. These groups are often small in membership, with very limited budgets. New tariffs would mean another expense requiring increased fund-raising efforts in order to hold simple activities.

Municipal governments support arts and culture in many ways. There is concern that fee increases could have a negative impact on service delivery to arts and leisure participants. Furthermore, there is no way of knowing what percentage of any fees would reach the artist. We feel that the need for a tariff should be balanced against the ability of small municipalities and their constituents to pay such fees.

Under the proposed revisions, special measures will be granted to users such as non-profit educational institutions, libraries, archives, and museums. FCM believes it would be fair to extend a similar exemption to municipalities whenever an increase in tariffs would represent significant hardship.

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On the subject of Canadian content, we note that music users such as bars, hotels, restaurants, and sports arenas, unlike radio stations, have some flexibility in decreasing their use of Canadian content to reduce neighbouring rights costs. This would not be an acceptable outcome and the Copyright Act should not encourage such behaviour. The special circumstances of French-language communities should also be considered.

In closing, I want to stress that while FCM remains strongly supportive of municipal arts communities, it fears the proposed copyright payments would have a negative impact on the continued viability of local radio stations and the ability of small municipalities and community groups to hold public events. It is FCM's hope that in setting tariffs and implementing this bill the government will take into account the concerns of small municipalities across Canada.

I want to thank the committee for this opportunity to present our views. We'll be more than happy to answer any questions.

The Chairman: Mr. Roche, thanks first of all for your very concise presentation. Your members represent a huge body of opinion in Canada. You've pointed out that your member municipalities represent many millions of Canadians, so your views are important to us. I'm sure the members will be very pleased and interested in questioning you.

I'd like to start with the first round of five minutes each, starting with the parties of the opposition. Mr. Leroux.

[Translation]

Mr. Leroux (Richmond - Wolfe): Thank you for your presentation.

You have many concerns and you have expressed them clearly. Essentially, you have listed the concerns raised by the bill. We can clearly see that there is strong opposition amongst those who must pay royalties.

I would like to know whether you are basically against neighbouring rights. Setting aside the fact that you have a great deal of concerns, do you agree with the principle of neighbouring rights?

[English]

Mr. Roche: I think the principle is fair enough. The concern is a practical concern.

I think too we must recognize that when we surveyed our members, before the bill was tabled, we were not aware of the exemption under proposed new section 68.1, which is a more recent development. I think that is going to make a big difference, and I'd certainly like to express our thanks for that.

There are other effects, of course. One of those is that parent stations can still be hit for substantial fees and that could affect cross-subsidization of stations. There are other issues, such as time shift and transfer of format, that might warrant exceptions. But I think the exemption that has been put in place is a very big step forward.

[Translation]

Mr. Leroux: You appear to be listing a series of arguments that can be found in the reports submitted by the radio broadcasters and television broadcasters themselves. In my opinion, neighbouring rights have a special impact on municipalities, but I want to first deal with the question of radio stations. You refer to the $1.25 million exemption that has just been proposed. In your opinion, does this proposal protect the small radio stations, radio stations that are more often than not found in the regions? Does this measure give you greater reassurance?

[English]

Mr. Roche: If I understand the question correctly, you're asking me if the small radio stations are better off with the exemption. They will be very much better off, there is no question about that. We do feel, however, a complete exemption would have been more helpful to them. We are very concerned about the value of small radio stations. We'd like to see everything done to protect that.

I really wouldn't want to go much further, other than to say there is a very strong regard for the importance of small radio stations.

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As far as larger municipalities are concerned, we don't hear a great deal from them. What we do hear is along the lines that they have a stake in their arts communities, so the issue comes across to them a little bit differently.

At the same time, I think any municipality has the view that you're better off to save the money and grant it directly to your arts and culture groups than you are to filter it through a process where we're not quite clear how much of the fees are going to get down to the artist at the end. That has been a matter of some concern.

[Translation]

Mr. Leroux: All right. You understand that, as far as neighbouring rights are concerned, the Copyright Board will rule on any royalty mechanism on the basis of what is indicated in the bill. Consequently, we have some very specific tools that will assist us with redistribution and decision-making. I will bear your concerns in mind, it is important to do so.

I would now like to touch upon something that is a bit more concrete. At present, the copyright royalties paid by the municipalities are generally for public performances. How much money do you think the municipalities pay out to composers as royalties under the Copyright Act? Do you have any figures on this?

[English]

Mr. Roche: We're not talking about huge sums of money. This is not a megabucks argument. We're not going to see a national effect from this.

What I'm talking about here, and what is of concern to our members, is really the impact on very small groups, although when you take all of these small groups and put them together you still don't have a large sum of money. We're talking about charities and local sports groups and the like that are trying to organize functions that are somewhat marginal in their financial success. Where the costs of neighbouring rights payments to radio stations could be up to $8 million, the cost to municipalities would be a very small fraction of that, I would think.

[Translation]

Mr. Leroux: Could you tell us how the system now operates? You make payments to an organization, SOCAN, which represents collective rights. How are the amounts that you or the groups pay calculated? Is there a registry indicating the works used by the municipalities?

[English]

Mr. Roche: I understand the payments are made to SOCAN and distributed by SOCAN. I'm not in possession of information as to what the register is or how the amounts are calculated, but we have the impression that the amounts are easier to absorb by larger municipalities than they are by smaller municipalities. This is what we hear from our members.

[Translation]

The Chairman: Mr. Leroux, you can ask this later on if you wish.

[English]

Just before I give the floor to Mr. Abbott, I have one point of clarification, Mr. Roche. When you mentioned the exemption to proposed section 68.1, what you're talking about is the tariff limit of $100 up to revenues of $1,250,000. Is that it?

Mr. Roche: That's exactly it, Mr. Chairman.

The Chairman: Thank you. Mr. Abbott.

Mr. Abbott (Kootenay East): Just a quick note. When the Canadian Association of Broadcasters was before us this morning I reflected, as you did on page 2 of your report here, on the fact that radio stations are often the only source of local daily news, and on how important they are to the social fabric.

I just mention that in passing, because one of my own pet concerns - and it's a deep concern - is exactly what you're talking about, that there is more and more programming happening well outside of communities to the point that knowing about school bus closures and things of that nature we can't assume will happen. I would suggest that your organization, along with anyone else who is concerned about this, would want to continue to put pressure on the broadcast industry about that issue.

This segues into the fact that there is an argument that artists should receive compensation for their work. With the CAB argument, as I understand it, they are basically saying one of the major compensations for the artists is the fact that they are receiving airplay, and that therefore their records are going to sell.

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In your opinion, what is the argument of your organization on the compensation? In other words, do you agree that artists should receive compensation for their work, and what compensation do they receive for their work from the municipalities?

Mr. Roche: Our position has to be viewed as a very practical one. When you move from one situation to another, when there was no charge before and there is going to be a charge in the future, you have to look at the practicalities from your own point of view. Smaller communities in particular are concerned, and they're hearing from their local radio stations that this could be a bad thing. That is the concern.

I don't think those communities spend a lot of time reflecting on whether artists should be paid, nor do I really want to spend much time on the argument that artists are reimbursed by the very fact that their works are played, although that does appear to have some logic to it. This is not the sort of thing communities are saying.

Communities are saying they don't want to be faced with closures of local radio stations, and they're also saying they don't want to absorb additional administration costs and they don't want to have negative impacts on their arts and culture groups.

Mr. Abbott: On page 4 you say:

The existing tariff structure sets out to take one-third to one-half of the revenue taken in at an activity such as this.

That was referring to a specific activity, and you offered to table it. Could you expand on that a little bit? That sounds like just a gross amount of money.

On advice, we felt we should table that particular thing, although we did hear from what I would consider a very impeccable source that it was the case. This is a situation were you have a very small group, say 20 people, in a small community such as Meadow Lake, Saskatchewan, participating in a skating event. So you have a fairly expensive program to organize for very few people.

Having to absorb the cost of the SOCAN fees at the present time puts you in a difficult position. We can take another look at whether it's one-third or one-half of the revenue. I frankly don't know whether it is or not. But we were told by our member that it was the case.

Mr. Abbott: In conclusion, if this became a real problem for small groups such as the one we're talking about right now, is it possible they might choose to simply circumvent the legislation by playing all non-Canadian artists at an event like that, thereby walking around the fees?

Mr. Roche: That's something I mentioned in my brief, of course.

I would not be the one to say that municipalities would do anything as un-Canadian as that, but I can't speak for the bars and restaurants. I'll let them speak for themselves.

At the same time, the important principle here is that the Copyright Act shouldn't encourage such behaviour. Clearly what we're trying to do is support Canadian content, and the municipalities are in favour of that. We're just talking about how to handle this fee arrangement.

The Chairman: Thank you, Mr. Abbott.

Mr. Arseneault.

Mr. Arseneault (Restigouche - Chaleur): Thank you, Mr. Chairman.

I'm pleased to hear the Federation of Canadian Municipalities this evening in their concentration on two points, local radio stations and public events. I want to concentrate on those two items at this time.

First of all, with regard to proposed section 68.1, which has to do with the exemption of $1.25 million, it's important to point out, Mr. Roche - and I appreciate your support on that exemption - that we estimate that two-thirds of all radio stations across Canada, due to that exemption, will pay no more than $100 per year for neighbouring rights.

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There is another point that should be addressed here as well. You did mention the large radio stations, and it should be pointed out that they also get the exemption on the first $1.25 million, so that's a benefit to them as well. So that's the other one-third of radio stations.

Along with that, for the large radio stations we have the five-year transition. I don't know if you were aware of that, but there's a five-year transition; the fees will not come in overnight.

With regard to neighbouring rights, I'm glad to see the federation has endorsed the principle, and I think it's a principle that's endorsed by all Canadians. I'd like to query you a little bit with regard to public events.

We heard radio stations this morning talk about how they contribute to the artists by playing their music; they promote it. But on the other side of the ledger, the radio stations would have a difficult time selling publicity if all they had on the radio were politicians speaking or other newscasts or things of that nature. They need music to play on their radios so they can go after advertising.

I say the same argument would go for the municipalities, because the reason for most of your public events, I would think, is to draw revenue. Am I not correct? I'm just wondering if you are in agreement that since the overall scheme of these public events is to draw revenue and since you agree with neighbouring rights, the artists should be compensated in some shape or form. I'll leave you to answer that.

Before you get going on that question, I'd like to ask you if you have any indication, from the research you've done, of what specific amounts of money a community would be required to pay. Perhaps you could give us some examples from a certain community. I've been led to believe that the rates would be set by the Copyright Board, but their rates would be much lower than the SOCAN rates and as such would be very minimal to most municipalities.

Would you answer that, please?

Mr. Roche: To answer the first question on the purpose, it goes beyond revenue-raising, although charitable events may be for that purpose. There is the objective of recreation and leisure and community activities of one kind or another. That's very important, particularly in small and rural communities.

As to the actual cost, I've already agreed these are not large dollar amounts. They may have effects on particular functions or on particular small groups, but we're not making the point that this is going to destroy the financial capacity of municipalities.

It can have an effect on some of their programs. That's the only point I would want to make.

Mr. Arseneault: You would agree, then, that it's very minimal. Looking at some of the points you raise on expenses, salaries, facilities and things of that nature, it would probably be very minimal when you compare them.

Mr. Roche: We certainly hope it will be very minimal. It's not entirely clear to us how the costs will work through. We'll learn that as we go along. But at this stage we want to make the point that municipalities out there have particular concerns, and you're obviously noting those down. We wouldn't ask you to do much more than that tonight.

Mr. Arseneault: Thank you.

The Chairman: Thank you, Mr. Arseneault.

[Translation]

Mr. Leroux.

Mr. Leroux: Your concerns will be given consideration. I would like to go back to something else that you said. I know that you recognize neighbouring rights, however, at the same time, you must recognize them. You have to make exemptions in order to get around these neighbouring rights.

This is of some concern to me. Earlier, you described the situation whereby, through SOCAN perhaps, monies paid would not necessarily be... You don't provide any figures, but you have given the impression that perhaps things are not being done quite properly. Is this collective management mechanism, such as SOCAN, working well or should it be completely rethought?

We know that, right now, the most that municipalities would have to pay for fees is $150 per year.

.1900

If I were to make a projection for neighbouring rights, it would perhaps not amount to even half this amount. I realize that your concerns deal primarily with the protection of an environment, as opposed to the possible impact on the municipalities.

I would like to go back to the SOCAN issue. You have given us the impression, but you have not provided any figures, that something is happening that is not quite right. Could you be more specific?

[English]

Mr. Roche: Mr. Chairman, I wouldn't want to be on record as saying SOCAN is not behaving in the proper way. We're not getting complaints from municipalities concerning the existing system. The comments we sought were all concerned with the neighbouring rights addition and the adjustment that might occur as a result of that addition.

Relatively minor questions have arisen from time to time. For example, I recall when municipal governments lease out space for particular events to groups that are not under their control, the question of who makes the payment to SOCAN and who has liability for payments not made has been raised from time to time. But generally there is not a problem with the existing system.

About the amounts municipalities would pay, we're back to the same question. I can only say we're not talking about large sums of money here. We're not talking about how large organizations would be affected. We're talking about how individuals and small organizations could be affected. That's the only concern we're trying to express tonight.

[Translation]

Mr. Leroux: Thank you.

The Chairman: Thank you, Mr. Leroux.

[English]

Mr. Peric.

Mr. Peric (Cambridge): Thank you, Mr. Chairman.

Mr. Roche, you mentioned you're representing 600 individual municipalities, in addition to 17 provincial and territorial municipal associations, which would come to 20 million Canadians. That's a huge organization.

We know that under existing law the municipalities are paying royalties for public performance of music. I would retrieve the question from Mr. Leroux: how much are municipalities paying under the existing law and how much would they pay under the new law? Can you give us an example of how much the new law would affect a small municipality in Canada?

Mr. Roche: We're coming back to the same question again. On what is paid to SOCAN under the existing arrangements, I think the radio stations would pay about $22 million per year or something like that. Municipalities would be perhaps below $1 million. These are not large sums of money. So in terms of the amounts that would be payable under the new regime, once again I have to say we're not looking at impressive amounts. But we're concerned about small communities and we're concerned about small groups.

The Chairman: Mr. Bélanger.

Mr. Bélanger (Ottawa - Vanier): I would like to pursue that, then ask another question.

Mr. Roche, what does a municipality pay per year for the right to play musical recordings? I'm told it's $90 for one year. If I average that over 360 days - let's suppose we're not going to be there 5 days a year - that's something like 25¢.

Mr. Roche: Your calculation is probably correct, but I think you should direct your question to SOCAN for what they collect from municipal governments. There is not a concern on the part of municipal governments about the present rate of collection. That's not something they are concerned about.

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Mr. Bélanger: But I'm assuming - and that's an assumption that I understand some will have to make - that the neighbouring rights are equal or less, which is an assumption this committee has sort of been working with. Would you still maintain, therefore, the recommendation that: ``FCM believes that it would be fair to extend a similar exemption'' - that is, the exemption on neighbouring rights - ``to small municipalities where an increase in tariffs would represent significant hardship.''

I know you've changed that. You've removed ``small municipalities'' to include all of them. Do you still maintain that, sir?

Mr. Roche: Everything is a question of scale, and I think the position we want to take on this is that we want you, during the course of your hearings....

Bear in mind that we have not had hearings ourselves. This is not a major issue for us. This is not a megabucks issue.

Mr. Bélanger: Fair enough. We invited you here.

Mr. Roche: Yes, you did invite me here last Thursday, and we were on a hearing yesterday and also at meetings over the weekend, so we've had limited time to prepare for this.

I simply want to leave you with the principles I've expressed, and I'm sure as the other witnesses come forward you'll be able to make a firm judgment.

Mr. Bélanger: The other question refers to page 5 of your presentation, on Canadian content. The last sentence there was: ``The special circumstances of French-language communities should also be considered.'' I wonder if you would be kind enough to elaborate.

Mr. Roche: I think I was referring there to the incentive that might exist to play U.S. works instead of Canadian works. It's certainly not good for English-speaking communities to have that situation, but I think it's more damaging in the case of French-language communities.

Also, as you are aware, in the case of radio stations the content regulations are set higher for French-language radio than for English, so you have a pressure on the French-language stations there that cannot be relieved by selecting more U.S. programming.

[Translation]

Mr. Bélanger: Thank you, Mr. Chairman.

[English]

The Chairman: Mr. Abbott.

Mr. Abbott: I want to pick up on the point Mr. Arseneault was making, that these are minimal charges. The first issue is, it seems to me what's going on here is that we would be talking about impacts to small individual events. In other words, these may be minimal charges in the overall giant scheme of collecting $10 million, $15 million, or $30 million of revenue for a municipality. This is only $90,000, I say with tongue in cheek.

The point is that what we're really talking about here is the impact on the small individual event, almost the charity-based or recreational side.

The second thing is, I understand your concern is that it is open-ended. It could rise, and you don't know where it's going to go.

May I make a suggestion? In addition to tabling the document you referred to in your presentation, I believe it would be helpful to the committee if you would consider having an opportunity to do some research so that you could give us a concrete idea. I believe all of us on the committee have basically been asking the same question: how many dollars are we actually talking about? Let's quantify this thing. Once we've quantified the thing, then I think we can take a look at what the concerns of the federation are.

Mr. Roche: We would be pleased to do that, Mr. Chairman.

The Chairman: Thank you, Mr. Roche.

Mr. Peric.

Mr. Peric: Thank you, Mr. Chairman. According to SOCAN's financial statement, throughout Canada the total copyright fees paid in 1995 by the following groups are: the skating rinks, $117,000; public parks, $39,000; and recreational facilities, $26,000.

Mr. Chairman, Mr. Roche is right that we are not talking about megabucks. If that's the concern of the federation, then I would consider it a minor concern and I hope the municipalities will support this bill.

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Mr. Roche: In reply to that, Mr. Chairman, the numbers are getting smaller and smaller. While this is reassuring, I'm tempted to say why bother with all of this.

[Translation]

The Chairman: Mr. Bélanger.

Mr. Bélanger: We are going to decrease these figures even further, if we may. Mr. Abbott referred to a figure of $90,000 earlier. I do not know whether he was referring to one of my comments, but I was speaking about $90 per year, not $90,000. Let's agree on this: $90 and not $90,000. Ninety dollars isn't very much;

it's the equivalent of 25¢ per day.

Mr. Leroux: Yes, but the Act talks about a maximum of $150 per year for revenues in the area of $12,000 to $12,500 for one event. This would be a maximum of $150 or $180. Those are the rules of the game that have been established. You are aware of them; those are the rules of the game.

What I was trying to get you to tell me, was why, when you are aware of the rules governing SOCAN's relationship with the municipalities and you're aware of this tariff - you in fact said that that had no impact - you do not mention the figures explicitly.

The Chairman: What I understood from the discussion was that Mr. Roche has said that he would provide us with the figures for the municipalities, in order to answer Mr. Abbott's question. Is that not right? Therefore, the question has been resolved.

[English]

Mr. Roche and Ms Tourangeau, thank you for appearing. I wanted to ask you one brief question before we close.

Last April you mentioned that your president wrote to all the municipalities, and the small municipalities were not very favourable to neighbouring rights or the amendments to the act. What was the rate of response of municipalities, big and small? Was it high, low or in between?

Mr. Roche: It was low for large municipalities. We did hear from one by mail expressing the other side of the equation, which is the importance of the arts community. We had about 30 letters from smaller communities, which is a good response to a survey like that.

The Chairman: Thank you very much for your appearance. We appreciate your coming to see us tonight to give us your insights.

We will suspend for five minutes.

[Translation]

I will suspend the meeting for five minutes because the next witnesses have to set up an audiovisual system.

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.1918

[English]

The Chairman: I call the meeting to order. I would like to welcome once again

[Translation]

the Television Board of the Canadian Association of Broadcasters

[English]

of which Mr. Michael McCabe is the president and CEO.

Mr. McCabe, maybe you could introduce your colleagues.

Mr. Michael McCabe (President and Chief Executive Officer, Canadian Association of Broadcasters): Thank you very much, Mr. Chairman. With me tonight to speak on behalf of the television board of the CAB are Bryn Matthews, who is the president and general manager of BBS/CJOH-TV here in Ottawa; Peter Miller, our senior vice-president and general counsel; and Cynthia Rathwell, our legal counsel.

The CAB represents 72 private television stations and networks. However, I would like to point out that the CBC as well has specifically endorsed our submission to you, as you will have noticed, and our views in this appearance are shared by specialty and pay services like Astral and Netstar, which have filed submissions very much along the same lines.

[Translation]

Thank you for giving us an opportunity to give you the opinion of the Television Board of the CAB. Normally, for such important issues, the members of the Board would have come in from all regions of Canada to participate in the discussion. However, given the short notice and the confusion with respect to the date of our appearance, you will no doubt understand that not everyone was able to make it here.

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[English]

I would like to say at the outset that this is one of the most difficult appearances on behalf of the broadcasting industry we've ever had to make.

First, given all the ways this bill affects us, we have had to figure out which ones we can realistically deal with in the 45 minutes we have this evening.

Second, somehow we have to convince you to change some of this in the face of all the complexity, the very theoretical approach of government officials, and the opposition from at least 15 other associations and groups representing various aspects of the music industry. That's a big task, but I have to admit it's nothing compared to yours, because you have given yourself five weeks to sift through some of the most complex legislation in Canada with highly divergent, virtually irreconcilable views offered by some of the parties. You will quickly realize, if you haven't already, why it has taken 10 years for this legislation to see the light of day. Most difficult of all, if you and your colleagues in this House pass this bill largely as it stands, is that you will have to explain to Canadians why it made sense to cause cancellation of some of their favourite Canadian programs.

While much of this bill may make sense in theory to bureaucrats, at the end of the day we don't live in a theoretical world. We live in a very practical one. We as television broadcasters have to operate as businesses and compete every day with a myriad of choices coming from south of the border. Canadians exercise those choices. They will cross the border, either physically or through their media, if we are not careful.

If we can leave you with one message today, it is to suggest that you need to go beyond the theory and the principle and look at the practical effects of what is before you for Canadians and the businesses that serve them. Canadians need you, the members of Parliament, to make this a practicable, workable law. Common sense will be your best guide.

With that in mind, we would like to do three things in the next few minutes. First, we would like to run through the numerous ways in which this bill directly affects broadcasters and how the proposals stack up with our major competitor, the U.S., and other countries. Second, we would like to look briefly at the exploding competition faced by Canada's broadcasters, the need for criteria for the Copyright Board to take that into account, and the need to reflect carefully on new copyright burdens as a result. Third, we want to examine the practical and operational needs broadcasters have for two related exceptions - time shifting and transfer of format - in order to continue to serve Canadians well.

Peter.

Mr. Peter Miller (Senior Vice-President and General Counsel, Canadian Association of Broadcasters): Thank you, Michael. Broadcasters are both creators and users of copyright. That gives us a unique perspective on the need to balance those interests. It also means that while we support the recognition of copyright, we also accept the need for exceptions for practical, economic, and broader public policy reasons.

In our brief, we made ten specific recommendations, three of them in common with the radio board. We don't have time this evening to go through all of them, nor can we anticipate the many issues others may raise that affect us. But from either the broadcaster as user or broadcaster as creator perspective, when you give even a cursory examination of Bill C-32, it doesn't look very good.

Looking at just some of the highlights, with respect to news and commentary produced by broadcasters, Bill C-32 provides an educational exception, but not for any other type of programming. The U.S. treats all programming equally. With respect to ephemeral right and transfer of medium, Bill C-32 quite inexplicably denies them. The U.S. has fair dealing and a full six-month ephemeral right. With regard to competitive market rates, Bill C-32 gives no criteria to the copyright board, whereas the U.S. requires a competitive market for music. The clincher for us is statutory fines and injunctions, which is the one thing the U.S. does to help creators. We put it in Bill C-32 after denying all these necessary practical measures.

I should add that we have a more full outline of some of these issues in a handout that we've provided to you.

.1925

The crafters of Bill C-32 were ingenious. They took European measures the U.S. has not adopted that hurt broadcasters, they denied U.S. measures that helped broadcasters, and they introduced the one U.S. measure that, in the absence of U.S.-style fair use counterbalances, will allow copyright owners to go after broadcasters for mere technical infringements.

Why should the U.S. matter? We're a different country. We have a different health care system and social welfare system. Why shouldn't we have a different copyright system?

If we were an island in the middle of the Pacific, maybe it wouldn't matter, but that's not the reality. In our business, at this time we cannot ignore the unprecedented level of competition coming from broadcasters to the south and the need to ensure that we can counter it.

Let's look a little bit at that competitive market. Canada has built what most consider to be one of the most successful broadcasting systems in the world in the face of major challenges. The U.S. spends $23 billion a year on television programming, at least $16 billion of which finds its way into Canada. The Canadian broadcasting system, on the other hand, is able to spend a mere $1.6 billion on Canadian programming - one-tenth - but through a delicate balancing act of obligations and benefits, the Canadian broadcasting system has managed to survive and in fact to prosper.

Most important, we have put Canada on its own screens, with Canadian programming being watched now 28% of the time by Canadians. But make no mistake about it. The delicate balancing act that has created this success story is under threat, and the addition of new cost burdens will have a significant negative impact.

In order to get a sense of the competitive challenges facing the television industry, we asked a leading Canadian consulting firm, Communications Management Inc., to prepare a thorough review. CMI's analysis, attached to our brief, is sober reading.

U.S. border stations now take at least $53 million per year out of the Canadian market, up from $31 million eight years ago. The profits of private television broadcasters remain significantly lower than other players in the communications sector, U.S. competitors, and even the Canadian sound recording industry.

Competition from unregulated U.S. satellites and the Internet will cause definite but as yet unpredictable losses in broadcaster revenues and hence will affect the ability to sustain Canadian programming.

Unfortunately, the issue is not just the direct cost of additional copyright burdens, although the fact that more than 50% of these moneys will leave the country is certainly disconcerting. The issue really is that if we are forced to cancel programming, we will lose viewers to U.S. stations and become less competitive.

A mere 1% loss of viewers and listeners to Canada's television broadcasters would translate into $25 million in lost revenues and indirect downstream losses of close to double that amount. CMI's conclusion to prevent the further erosion of Canada's broadcasters' competitive position is that it is vital that public policy-makers avoid imposing new copyright expense items not borne by U.S. competitors and that a more competitive rate for music licence fees currently paid by Canadian broadcasters should be established. It is that latter issue and its solution of competitive market rates that we would now like to turn to.

Canada's private broadcasters currently pay 2.1% of their revenues - that's right off the top - to authors, composers, and publishers to ``perform'' their music. That rate is paid to one of Canada's last monopolies, SOCAN.

If we use any music at all - and of course our use of music is unavoidable - we have only one choice. We must pay the 2.1% to SOCAN. We are barred from negotiating directly with SOCAN's members because, first, SOCAN requires its members to sign an exclusive licence that prevents them from negotiating access to any of their works directly or from having them represented by any other society. Secondly, even if there were an author or composer who was prepared not to be a member of SOCAN, there would be no point in our dealing with them, because we would still have to pay the full 2.1% for our inevitable use of other SOCAN music.

Almost forty years ago, when performing rights tariffs were first established, Canadian broadcasters and U.S. broadcasters paid the same rate for music: 2.1%. Because of SOCAN's monopoly and because SOCAN's rates have largely been left unchanged by the Copyright Board, Canadian broadcasters still pay 2.1%. In the U.S., on the other hand, because it is accepted that tariff rates should be market based, because there is more than one performing rights society, and because broadcasters can negotiate directly with authors, composers, and publishers, the effective rate has gradually come down to less than 1%. The irony here is that we end up paying American artists twice the rate that U.S. broadcasters pay them.

.1930

As broadcasters and in fact all creators face an increasingly competitive market, SOCAN has unaccountably been left in a privileged, insulated position. In every other area of copyright outside the Copyright Board's jurisdiction - photography, art, literature, even the production of film and sound recordings - competitive market rates prevail. They must, by definition, because it's all based on direct negotiation between the parties. Surely now, with competition in practically all respects being government policy, it is time the Copyright Board should be asked to implement this policy and reflect it in its tariffs.

Let us be clear. We mean no disrespect to the Copyright Board. While we have not been happy with all their decisions, we recognize that at the end of the day they have simply fulfilled their mandate as it has been presented to them. All we are suggesting is that now is the appropriate time to clarify that mandate, and in particular the rate-setting power of the board.

In its comments to you, the Copyright Board has itself stated that it is appropriate for the Governor in Council to establish criteria or issues to which an agency such as itself should have regard in exercising its discretion. We agree. In fact, we believe it is essential. It is not the role of any tribunal to create law or policy but to implement what Parliament intends.

In that vein, we urge you to support the principle of allowing the Governor in Council the power to set criteria and, moreover, as the most important illustration of this, to establish competitive criteria, either in the act or under regulation, that direct the board to establish market rates and the ability to negotiate directly with creators. This does not remove from the board the discretion to decide what competitive market rates actually are. We will argue that they should be the same rate as in the U.S., because we compete with them. The board may disagree and establish some other proxy. That would be their right. But establishing general market criteria and then leaving the board to interpret them will at least bring copyright closer in line with the government's policy of competition.

Mr. Bryn Matthews (Television Board, Canadian Association of Broadcasters): The final matter we would like to touch on in our view is the most frustrating and unnecessary flaw in this bill, and that is the absence of reasonable time-shifting and transfer-of-format exceptions. These would be exceptions to the so-called ``reproduction right''.

It's vital to understand that the reproduction right is owned by the same creators of music - the authors, composers, and publishers - as own the performing right, the 2.1% we pay to SOCAN. However, while SOCAN represents effectively all authors, composers, and publishers in Canada for the purposes of performing right, the reproduction right is retained by authors, composers, and publishers themselves, or as they are represented by collectives such as SODRAC or agencies such as CMRRA. What is so frustrating about the absence of ephemeral right and transfer-of-medium exceptions is that it demonstrates that the crafters of this bill do not recognize, and perhaps haven't taken the time to understand, how we operate and therefore why these exceptions are so essential.

I understand the radio board this morning clearly outlined the need for these exceptions for their industry, particularly the transfer of format. In television we have the same need to make non-commercial reproductions of a program to make a show ready for broadcast - to put it on tape, then perhaps to edit the tape and possibly transfer it to a file server for later playback. For television, however, the need for an ephemeral right exemption is even more pronounced. Therefore we'll spend most of our time on that.

Simply put, without it, and notwithstanding the fact that we already pay 2.1% of our revenues for the performing right, it would an infringement of copyright to delay-tape live programming to comply with industry codes and standards; to edit coverage of local concerts, talent shows, and parades for later broadcast; to record and play back programming to accommodate Canada's numbers of time zones; and even to provide instant replays or highlight summaries of sports events that contain music. The simple act of time-delaying programs containing music triggers the infringement, because time-delaying requires reproduction. If a program is aired live, then the performing right, which we pay to SOCAN, is all that's required.

In recognition of this reality, at least 28 other countries around the world have provided for a time-shifting or ephemeral right. I think you have a page in your file that details the time-shifting exemptions in those 28 countries. It's particularly important to a country such as Canada, with our six time zones, because to do without would be to implement a central Canadian policy that effectively discriminates against the other regions of the country.

.1935

The best way to understand all of this is to look at some of the programs that will be affected. We've selected four programs for you to consider. These shows represent programs that will be jeopardized by the absence of an ephemeral right.

[Video Presentation]

Mr. Matthews: This program, as many of you may know, is produced at CJOH-TV. It promotes new and undiscovered talent. The performance of that song you just heard, If Tomorrow Never Comes, was written by Garth Brooks. It was performed by this local young performer, who's had virtually no television exposure before.

This program is designed to provide a kind of launching pad exposure of Canadian talent. The programs are pre-recorded at CJOH-TV. They're edited for a modest time delay for telecasting. They're all amateur performers. They would have to pre-clear their repertoire in order to appear on the talent discovery program. Additional costs and the inability to pre-clear the music would impede the production of this show. The production of amateur television shows like this will in fact no longer be broadcast or created under the provisions of this act simply because of cost.

[Video Presentation]

Mr. Matthews: This show is called Intimate and Interactive. It was produced by MuchMusic. It was created live-to-air in March 1966, and featured Amanda Marshall. Pre-taped segments are also rolled into this show from other artists. The telecast was delayed for broadcast. It actually was live-to-air, but was then delayed for broadcast into the other Canadian time zones. That, of course, would be prohibited under Bill C-32.

The artist's record label, pursuant to the contract with MuchMusic, was responsible for obtaining the synchronization licences. Seven months later, these licences have not been cleared or finalized. The program was designed to promote the new recordings of prominent Canadian artists. In this case, it was Ms Marshall's new album and forthcoming releases. Ms Marshall and her songwriters consented to the original and repeat telecasts.

[Video Presentation]

Mr. Matthews: This show is live and interactive. As you can see, that last clip was meant to demonstrate that. Notwithstanding the consent from the performer, songwriters, and recording company, the Canadian Mechanical Reproduction Rights Agency, made demands on MuchMusic that effectively made it impossible to get clearances in a timely manner.

.1940

It is possible that injunctive relief would have been available to CMRRA pursuant to Bill C-32 and would have blocked this telecast. It certainly would have blocked the repeat telecast.

[Video Presentation]

Mr. Matthews: This again was a live event. Tom Cochrane, a Canadian artist, appeared on this MuchMusic show. He simply dropped into the studio and asked if he could go on. This is not uncommon in television stations across the country. We at CJOH-TV have artists who come in and ask if they can be on the show. We certainly try to accommodate them for their own publicity. If they're good, as this person is, the performances are spontaneous and very germane to the program that was being done.

The telecast was taped and delayed for broadcast to other time zones. Again, in this context, it would be prohibited under the new legislation.

[Video Presentation]

Mr. Matthews: This was the Annual Oktoberfest Parade produced by CKCO-TV in Kitchener. The local talent, which were obviously exclusively showcased in this instance, were dozens of musical selections and bands from around the area. You couldn't possibly know the repertoire in advance, provide cue sheets, or create any kind of negotiation with the rights holders. So in this instance, you wouldn't find us able to do these sorts of parades.

[Video Presentation]

Mr. Matthews: Pre-clearance, as I said, is impossible in a live parade telecast. Live-to-tape coverage of events often require editing prior to the same day, which takes place over a few hours. This parade might have been two and a half hours long. It would be telescoped into an hour's duration - to watch a parade of three hours or two and a half hours might put you to sleep pretty quickly - and we enhance it with commentary and what not. So that very act alone would effectively prevent us from adhering to the law as it's proposed.

This kind of live-to-tape programming represents about 20% of our schedules. That's not a huge amount in quantity, but it is the kind of programming that is instantaneous and close to our communities. An exception to the reproduction right for this programming is just common sense. For the most part, we don't control the music used, and we cannot know in advance what music will be used in these kinds of environments.

For the rest of our programming, which is planned in advance and destined for broader distribution, it is appropriate for the reproduction right to be paid. We are already paying for that right. But to fail to provide a limited exception for live-to-tape programming ignores the realities of our business and leaves us at the mercy of whatever rates authors and composers or publishers would want to charge.

How do you have any reasonable negotiation in the 24 hours you have between the taping and the airing of a program or, worse still, after you've already incorporated the music? How do you have any reasonable negotiation when every technical infringement entitles a rights holder to a fine of up to $20,000 under the statutory fine provisions of this bill?

You can't do so; you can only be held to ransom. Anyone who says you can do so is living in a theoretical, utopian world, not the Canadian broadcasting and music market of today. If every broadcasting outlet in Canada was charged $500 for one infringement per day out of the dozens, if not hundreds, of technical reproductions they would actually do for operational reasons, the total fines would come to more than $100 million a year.

That may sound preposterous, but that is in fact the position we're left in, without reasonable exceptions, if statutory fines are put in place.

.1945

Mr. McCabe: Thank you very much, Bryn.

In conclusion, let me again say that as creators and users of works, broadcasters recognize the importance of copyright, but neither we nor you can be doctrinaire. If we can accept limits on freedom of speech in our charter, we can accept limits and exceptions in copyright. At the end of the day the issue must not be theoretical, but practical. Parliament should not implement a law that is in effect unworkable. For you the litmus test is not what I or anybody else who comes before you says, but what it means to Canadians in the communities you represent.

We wish you the best of luck.

[Translation]

The Chairman: Thank you very much, Mr. McCabe.

Before we turn to questions, I would like to point out something that struck me; the video you showed us was only in English. As you know, everything that goes on here at the committee level must, just like in Parliament, be conducted in both official languages.

I realize that you had very little time to prepare, but at the same time I would like to point this out and to request that, if possible, you send us a French version of the film because otherwise it will certainly not be of much use to our colleagues who express themselves in French and whose first language is French. At any rate, there is no question that they are entitled to have French placed on the same footing as English here.

Mr. McCabe: Certainly, Mr. Chairman, we will do that. This happened because we received the tape yesterday morning. It was therefore impossible to translate it ahead of time, but we will do so immediately.

The Chairman: I didn't want to interrupt you, but, under normal circumstances, I shouldn't have accepted it because that goes against the Standing Orders of the House. I did accept it, however, because I did not want to interrupt your presentation. However, I have pointed this out and I would like things to be rectified as soon as possible.

Mr. McCabe: Thank you, Mr. Chairman.

The Chairman: Mr. Leroux.

Mr. Leroux: Thank you, Mr. Chairman, especially for your comment.

Mr. Chairman, I have the impression that this presentation illustrates a basic problem, namely the absence of management companies on the anglophone side and the assertive presence of SODRAC in the agreement. I think that this poses a problem that you have pointed out. There is a vacuum. Whom are you working with? Whom are you negotiating with? This was demonstrated clearly in your presentation.

Moreover, this is already being done. That is why I have trouble understanding this. Nothing has changed in this regard. You should have paid fees, but the management society that you should have been dealing with does not exist.

Whatever the case may be, Mr. Chairman, a lot of issues are raised in this brief. You clarify several points. I think that you are extremely disappointed; you have been making representations for a very long time and you were under the impression that ephemeral rights and exceptions would be mentioned. I believe that that is more or less what you were thinking.

You talked about losses. I will get back to this. I would also like to go back to the issue of SOCAN, because I would like to refer to a few of the statements that you made. I think that I will do that right now. You talked about a monopoly. Do we agree that, from the very start, this collective society referred to as SOCAN was indeed authorized by the Competition Bureau, because it is subject to the Copyright Board, which establishes and monitors the procedure and the rates? Consequently, I am not sure that you are using the right words when you talk about a monopoly. This is a collective society. I will go into the details about the mechanism at a later point.

Two questions. First of all, I would like you to explain how the Act will make you lose about 30 million dollars. This is what you said in your report. Earlier, I heard the figure 25 million dollars.

Mr. McCabe: In our presentation, we talked about both radio and television.

Mr. Leroux: All right. Well...

Mr. McCabe: But this evening we are talking solely about...

Mr. Leroux: Are we talking about 30 or 25 million dollars?

Mr. McCabe: Twenty-five million dollars for television and five million dollars for radio.

Mr. Leroux: All right. Let's talk about these figures. I would like you to explain how these losses are connected with the bill. What in the bill results in such losses? I would like you to demonstrate how this is so.

In the same breath, given that we are talking about a collective society, I would like you to explain how the agreement with SODRAC works. Because this must be said: the agreement with SODRAC authorizes you to make ephemeral recordings. It allows for ephemeral recording and mechanical transformation simply by sending in a cue sheet.

.1950

I would like you to talk about this agreement, describe how it works and, finally, I would like you to say that ephemeral rights are recognized in this agreement.

Mr. Miller: First of all, the amount of 25 million dollars is an example of the revenue that will be lost because of competition problems that will arise from this bill. Direct losses attributed to this bill are, according to estimates, in the area of five million dollars, which is the value of ephemeral recordings. We are therefore talking about two things: direct costs and the value of ephemeral rights, which we heard will be worth about seven million dollars for both radio and television. I think this is the figure mentioned by one of the Minister's assistants earlier. Radio ephemeral rights are estimated to be worth approximately two million dollars and those for television are about five million dollars.

We arrived at this figure after doing a simple calculation based on the agreement that currently exists with SODRAC, if this agreement were to apply to the rest of Canada. It does not include fines nor does it take into account what would happen should there not be a collective society such as SODRAC in the rest of Canada.

The five million dollars therefore represents a minimum amount. In addition, if the bill caused competition problems resulting in a loss of only 1% of our subscribers, the loss in revenue would be in the order of about 25 million dollars.

How does SODRAC operate? We understand that SODRAC has agreements with a few radio broadcasters, who are in actual fact television broadcasters. It has a contract with TV5 and a contract with TQS, which expires at the end of the year. It doesn't have a contract with Radio-Canada, but their last contact is continuing; it doesn't have a contract with Télé-Métropole. These are the only contracts that exist. It doesn't have a contract with local services in Quebec. It doesn't have any contracts with radio stations, as was mentioned this morning. It does not have any contracts with community cable TV services.

Moreover, these contracts apply only to the French repertoire, and not in its entirety. It's estimated they would cover between 90 or 95% of the French repertoire. French language radio and television broadcasters use both the English and French language repertoire. There is no collective for the English language repertoire. There aren't any anywhere in the world, not even in France.

The argument that this could exist in Canada is not realistic. It's just not the world we live in. Theoretically it may be possible but there isn't any collective covering the French language repertoire. For anglophone radio and television broadcasters, it's obviously a major problem because it's their entire repertoire. But for French broadcasters, it only amounts to 50 or 60% of their repertoire. Of course there is SODRAC and it does authorize ephemeral reproduction rights. But that isn't the solution for our industry.

Mr. Leroux: You seem to be implying that it shouldn't exist and there should be something else in its place. You talk about competition, the needs of the market, etc. You also say that in order for you to be competitive in your market, the legislation will have to give you exemptions and create exceptions.

When it comes down to it, what you are asking for is indirect subsidies. You are trying to avoid paying the fees. You want indirect subsidies so that you can stay competitive, and for this reason, you want some recognition that in certain situations you will not have to make payments. This amounts to asking for subsidies, if we recognized, as you have done, the need for copyright and neighbouring rights.

.1955

What is to be done? You also suggest guidelines for the Copyright Board.

Mr. McCabe: I'll give you the first part of the answer and Peter can complete it.

[English]

I can do this better in English if I could, to be more precise. Today, for 80% of the repertoire - I'm talking television now - we already are in a market situation; that is, we do negotiate those rights back and forth. It is this 20% or so where we have programming where it's more spontaneous. We don't know the music in advance. It's for an ephemeral use - that is, for a very short period of time - that we are seeking what is in effect an exception that is an operational necessity. We're not trying to avoid the marketplace.

We are not seeking a subsidy. This is music we have already paid for. The music we put on the air that we are seeking this exception for is music we already pay for, and what's happening here is in fact a grab by the same people for some more money in order for us to do just the mechanical things we have to do to put it on the air. It isn't some attempt on our part to avoid the operation of the marketplace. All the parts of our business where we can operate in the marketplace, we do. This is a genuine exception we are looking for.

[Translation]

Mr. Leroux: You tell us that the negotiating mechanisms with the collective society SODRAC, which already authorizes ephemeral recordings and mechanical transformation, are not enough for you. These sort of things are outmoded and no use in dealing with the market that's opening up.

Mr. Miller: It must be understood that there weren't any contracts four years ago. It's only since the Bishop case that they've come into existence. Before then, we always operated as if an exemption for ephemeral recordings did exist.

So these are new contracts and they all contain clauses indicating that they will have to be renegotiated if changes are made to the law. This will be necessary, in spite of the small exemption contained in the bill for CRTC logger tapes.

We are not calling the basic principles into question. The exemptions are recognized. We are talking about the level of exemption. We also maintain that for radio and television broadcasters in Quebec and elsewhere in Canada it is not possible to carry out the kind of negotiations we had in the case of music.

In the so-called ephemeral programming, we are talking about live to tape recordings. We do not choose the performers or the music. We don't choose anything. We simply record the program and then air it. For this kind of programming, the situation is different. As Michael explained, it only occupies 20% of our programming. For this specific kind of program, we say it would be realistic to obtain an exemption.

[English]

The Chairman: Before I turn over to Mr. Abbott, I should thank Mr. Thomson and Mrs. Westcott, who are in the hall and are the next presenters. They have agreed to start a little later.

So this is an important question but not a chance to give Mr. Abbott and the Liberals.... So we'll give you a bit more time and if you could be concise in appreciation for the time they have given us.... We won't lose any time, we'll just finish a little later.

Mr. Abbott.

.2000

Mr. Abbott: Mr. Chairman, just before I begin, I think what we've uncovered here is that we probably have an unworkable schedule. If we're going to be tied to these 45-minute segments, particularly with the number of issues the CAB brought before us this morning, where they handled three of twelve issues and then we're into this one issue with them here, I suggest that we're going to have to be prepared to be flexible.

In other words, if SOCAN comes along and there are a number of questions there, we are going to have to build in more time. It is impossible to be able to handle issues as important and as complex as this in the time we've allowed ourselves.

The Chairman: That's what we are being now - flexible.

Mr. Abbott: I'm suggesting an extra 15 minutes isn't going to cut it.

The Chairman: That's fine. I didn't say no.

Mr. Abbott: Okay.

I'd just like to challenge something I read on pages 3 and 4 of your presentation today, that $16 billion under copyright must reflect competitive market realities, ``at least $16 billion of which finds its way into Canada''. Perhaps politicians have a tendency to get billions and millions mixed up, because it's other people's money - I don't know - but I do know that a billion is $1,000 million.

In other words, this is $16,000 million in programming that finds its way into Canada. Yet on page 4, the top line says, ``U.S. border stations now take at least $53 million a year out of the Canadian market''. When I compare $16,000 million with $53 million, I find the numbers don't compute.

Mr. McCabe: I think we're talking about two different things here. If you assume that an hour of high-quality drama is going to cost you about $1 million, and when you consider all of the United States studios and networks that are in fact producing this programming, it comes to over $20 billion, with $16 billion coming into this country. In other words, that's the production value, the money spent on the productions.

We're saying it's a marvel that we can spend $1.6 billion here on our productions and get 28% of the audience.

That $53 million is the value of advertising by Canadian companies in the United States. In other words, instead of putting their advertising on a Canadian station, they've gone over to the Buffalo station, or the Bellingham station, and put it on. So we're measuring two different things here.

Mr. Abbott: I understand we're dealing with two different things. It's just that with those numbers being so disparate, so far apart, I was having some difficulty with it. I was choking on it a little bit.

Mr. McCabe: We're merely trying to demonstrate with the first set of numbers, with the billions there, that the United States spends 10 times more than we do to make the programming, and yet we still do pretty well. But it's a finely balanced system to get 28% of the audience to Canadian programming. The other number essentially says we are increasingly losing advertising money, which is what supports us, to U.S. stations.

Mr. Abbott: My question to the Federation of Canadian Municipalities was whether it would be logical for the municipalities, in their own bailiwick, to simply bail out of using Canadian performers. That was not a facetious question if in fact it was a problem.

I pose the same question to you. You've shown us a tape here that is the grassroots. This is where the seed goes in the ground for the Canadian talent, for the exposure of the Canadian talent.

How serious are you when you say you will not only not be able to but in fact...? Some colleagues might take it as a threat. I do not. I do not take it as a threat. What I want to know is, how serious are you that this kind of programming would basically have to be either scaled back or terminated?

Mr. Matthews: Absolutely serious. I'm grateful you don't take it as a threat, because it's a reality, a financial reality, we would face. We've reckoned that in a simple program like Homegrown Cafe, which is not untypical of shows of its nature across the country.... There are several other equally effective examples, but in our instance, in order to clear the rights in advance, if you could.... The way in which we do the show, you simply could not clear them in advance, because we don't know what these kids really want to sing until maybe a day before, when they bring in their tape. We go through it, make sure it will play back on the audio board, get into the studio, rehearse it a couple of times and then do it. There's a problem of pure logistics in getting an opportunity to clear it. That clearance can take several weeks.

.2005

In my experience, when you do set about to clear and finally find out who the publisher is, it can cost you anywhere between $500 - and probably more than $1,000 - and an almost infinite number of dollars to clear a currently popular song. I don't think you can even clear a Beatles song, which is hardly currently popular. I know you couldn't clear it. They wouldn't give you permission to clear it. They just don't care whether you ever use that in a local context.

But a more currently popular song, like the Garth Brooks tune that we picked for this particular demonstration...we didn't try to clear it so I can't give you an exact figure, but I venture to say that it would cost you anywhere from $2,000 to $10,000 to clear that one song. The show uses seven songs.

The show uses seven musical pieces in either a dance or a vocal context. We figure that you'd be looking at anywhere between $10,000 and $30,000 a show. Multiply that by 22 shows and you're looking at a high end of about $600,000 and a low end of about $200,000 for the series. A series doesn't cost one-third of that. It costs an awful lot less than the $600,000. It would be lucky to hit a $100,000 of total production costs.

So to add $500,000 to that show would make it fully impractical to produce on a local level. These rates are there for major producers and major broadcasters in network environments where they are going to distribute the show on a North American or worldwide basis, not just on a local level.

Mr. McCabe: I'll make one more general point. Over the past few years since the Bishop case, a number of our broadcasters have said to us that they have essentially turned down musical shows in their programming schedule because they don't want to take the risk. The chill is already occurring. And again, this is not a threat -

Mr. Matthews: No. We have an example of that.

Mr. McCabe: It's been happening.

Mr. Matthews: We had an example at modest little CJOH where we produced musical variety shows of a country music nature over a number of years. We distributed those shows across the country and in a couple of instances sold them elsewhere in North America in a limited way. We were very careful to clear the rights in advance. We planned the shows very carefully and cleared them in advance. Keep in mind that this is a program created at a very local level. We found that the costs were just exorbitant. We couldn't afford to be in that production business any more and so closed down our production of country music shows for syndication. We couldn't do it any longer.

Mr. McCabe: If you'd played them live in a studio, there would have been no charge.

Mr. Matthews: Yes.

Mr. McCabe: It's only because you taped them to put on at a later date. We've already paid for that music, but because you tape it to put it on at a later date, you're charged. If you played it live, it wouldn't cost another nickel.

Mr. Matthews: If Homegrown Cafe were live on a Sunday evening at 6:30, there'd be no issue....

The Chairman: I would like to turn to the Liberal side. I believe you want to split your time,Ms Phinney.

Ms Phinney (Hamilton Mountain): I would like to clear up something first. I think you were using the word ``prohibitive'' when we all understood you to say ``prohibited''. You were saying that it would be very expensive for you, not that it is not allowed in this bill. Which word were you using? Were you saying programs were prohibited or prohibitive? You were talking about the fact that it would be very expensive for you -

Mr. Miller: It's -

Ms Phinney: Do you mean that somewhere in this bill it says that you couldn't do that?

Mr. Miller: No, let me go back a bit -

Ms Phinney: Just a very short answer, because I don't have much time.

Mr. Miller: There is a cost involved if you can clear it, so that would be prohibitive. But very often you cannot clear it, and if you cannot clear it that would be prohibited. So I think -

Ms Phinney: Right. But that's not the problem of the bill, that's whether someone else -

Mr. Miller: No. That's the problem with the bill, because we don't have the time to clear it.

Ms Phinney: But that's not saying it couldn't be cleared, that's saying that -

Mr. McCabe: But it prohibits the show because we can't take six months to clear it.

Ms Phinney: Okay.

.2010

Mr. Miller: That's why we said we have to be practical, because again in theory you can do it, but not in practice.

Ms Phinney: Yes, but that's not my question. My question really concerned the Copyright Board, where you're suggesting they should have more guidance. Giving direction or criteria to the board is an issue that would be quite controversial in here, as you realize, because some submissions from creator groups have argued that the Copyright Board should be totally independent. It could turn out that the restrictions will be something such as that they should take into consideration the low annual wages of creators. So it could turn against you by having more restrictions or by giving the Copyright Board more direction.

I'm just wondering if the issue here is really what the criteria are for the board or it is more who these criteria should favour.

Mr. Miller: There are two issues. First, should there be criteria? There are criteria in the act. We think there should be and it is appropriate.

Then there are other acts: the Patent Act for the National Energy Board, all these other acts that have criteria. Now, what should the criteria be? Our point is that they should suggest that rates set by the board should generally reflect a competitive market; i.e., be a proxy for what otherwise would be a competitive market. As we said, that might not be what we want all the time, I suppose, because someone may argue that what we think is the right proxy the U.S. does not. But if government has made competition policy - and as you know, with convergence policy and everything that's happening in the broadcasting environment, essentially competition is now government policy - we're saying it makes sense that this policy in a sense be communicated to the Copyright Board and they set tariffs that reflect that.

Ms Phinney: You're not concerned that this might in some way go against you, in that the criteria might be more in favour of the low-paid artist, who can hardly make a living?

Mr. Miller: We trust that if the government asks for competitive market rates they will in fact end up resulting in a lower rate than we're currently paying. We could be wrong, because you're right, some other people could ask for other criteria. But again, to say they should reflect more than a minimum wage would not be a competitive market, because we have a minimum wage. To say it should be more than that would not, in our view, be a competitive market criterion.

Ms Phinney: You're thinking of competitive as being whatever the Americans are doing in their system.

Mr. Miller: We think the rate in the U.S., which is the result of their competitive market, is the best proxy we have. Again, people would bring evidence before the Copyright Board and the Copyright Board might draw a different conclusion. We accept that. But we think the general principle of competitive market rates should be the criteria the board would follow.

The Chairman: Mr. Peric.

Mr. Peric: Mr. Matthews, I'm very sympathetic to your concern. You asked this committee to amend the bill to create an exception for transfer of format. How much has it cost you today in transfer of media? What's the figure?

Mr. Matthews: I'm not sure I understand. How much does it cost us to transfer from live to tape -

Mr. Peric: Yes, transfer the format.

Mr. Miller: It's not costing us anything, because we operate as if we have the exception. Again, the Bishop case was the case that said, you don't have this exception; you thought you did, but the court said sorry, it's not in the law, and while I'm sympathetic to your case, broadcasters, the legislature has to create an ephemeral or transfer exception. Since that we've been in this legal quagmire.

The notion of a transfer or an ephemeral exception has been on the table in Canada for forty years. We've always expected them to happen. We expected them to be in this bill. So we've operated as if we already had them. The trouble is that what you're doing in this bill.... If this bill passes without an ephemeral exception, then I guess Parliament will have decided there will never be one; or if it is without a transfer exception, Parliament will have decided there won't be one. That means all of a sudden the fact that we haven't been paying comes back to haunt us, because all these people who now can say ``you're infringing my reproduction right'' will come after us. Moreover, they can come after us with those statutory fines and injunctions. They could close down our station, theoretically. I don't think they would do that, because I don't think that would be a very smart move on their part, but they could certainly come to us and essentially demand whatever money they want, because we have to do this; it's part of our operations.

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That's our real problem. We're not paying for it now. As I think Dianne said this morning, the only cost to her is the staff that does it, because there is no fee right now.

Mr. Peric: If the bill passes as it is today, how much would it cost you afterwards?

Mr. Miller: I don't know. One proxy I've heard is the proxy for each soundtrack when it's put on a recording - that is, what a record company pays - and that's 6¢ per soundtrack. You could argue that you start multiplying that, and each time each piece of music.... We once did this exercise and it came to something like $4 million, if I remember correctly. I could get back to the committee on that if it interests you.

Mr. McCabe: I would like to add one thing. We are talking about a charge to do something mechanical that we don't make any money from, that we have to do to put it on the air. It isn't as if we're doing something that makes more money.

The Chairman: Gentlemen and ladies, we have spent one hour tonight, with the kind permission of the people who follow you. I realize the importance of the subject. I realize that members are very interested in asking questions. I will allow one question to each group if it is brief and if your answers are also brief.

[Translation]

Mr. Leroux.

Mr. Leroux: I'd like to quickly come back to ephemeral rights. What are you doing to clear these rights? Judging from what you've shown, it appears you do not clear the rights as required.

Mr. Miller: On the English side yes, but for English language music no.

Mr. Leroux: As I understand it, you have only your agreement with SODRAC and on the English side, you do not clear any rights.

Mr. Miller: Yes.

Mr. Leroux: You say, Mr. McCabe, that you pay a writer or a creator when you commission a piece of music or a program but when this music or program are reproduced, you refuse to pay royalties. So you pay the performer for the performance and then do not recognize any further rights.

Let me give you an example. You refuse to pay rights to the creator of the work you are reproducing or rebroadcasting because you say you are not making any money on it. I don't agree with you. You have an audience and you are selling television viewing hours.

[English]

Mr. McCabe: We don't think it is reasonable that having paid for the music, we should have another stumbling block to actually putting it on the air, which is purely mechanical, that we should have to pay one more time to get it on the air. This music is paid for.

The Chairman: Mr. Bélanger.

Mr. Bélanger: On the matter of ephemeral rights or exceptions, you ask in your brief for six months, yet in the presentation tonight at least two of the four examples you gave were matters of much less than that. You were talking about time zones, for instance, and instant replays.

Has there been any discussion about the principle of the matter in terms of your seeking an exemption from the reproduction rights until the time you make commercial use of that right? If that is so, why would you not be proposing instead a right that goes to first broadcast?

Mr. McCabe: Virtually the sole subject of the discussion we had with officials of both departments as we led up to this bill over a long period of time was the length of time of the exception. It never entered our minds, or the conversation, that it might not be in the bill. We talked about it endlessly and we never arrived at a conclusion. The reason we put six months in our proposal was essentially to go to the mid-point of what the rest of the world is doing, but we are open to discussion.

That is our problem. We were faced with a situation in which we had discussed the time over and over again, and no solution was arrived at.

.2020

Mr. Bélanger: I'm starting to get the impression that the difficulty is not with the neighbouring rights, but with the penalties that are coming with the bill, which could climb up to, by your estimates, $100 million versus the $4 or $5 million it would cost you to pay the rights. If this ever happens, I would imagine you would be paying the rights.

Mr. McCabe: Or not do the programming, as Bryn said.

Mr. Bélanger: That's the option.

Mr. McCabe: That's right.

Mr. Bélanger: Okay, thank you.

The Chairman: Thank you.

Mr. Abbott: Mr. Chairman, I have a question. I passed before.

You had mentioned that there were a number of issues that you were concerned about. We've spent virtually all of our time on time-shifting and ephemeral rights. Can you quickly give us a shopping list of the other issues that are of concern to you on this bill?

Mr. Miller: We had, as we said in our submission, 12 recommendations that were listed in an appendix to it. They covered things such as the criminal sanctions, the performer's performance, the definition of cinematographic work, the educational exemption, and the signal rights. So there are at least six other areas that we haven't touched upon.

The Chairman: Mr. McCabe, the interest shown by the members, all the questions, and the fact that we extended your time quite significantly shows that you have an important point of view to put forward. You've put it very forcefully, and we appreciate your presence. Thank you.

Mr. McCabe: Thank you very much for your courtesy in listening to us.

The Chairman: I'd like to call on the members from the Canadian Copyright Institute:Mr. Ron Thomson, chair; and Ms Grace Westcott, executive secretary.

Mr. Thomson, I am terribly sorry for the delay. I appreciate your understanding in the cause of being flexible and giving the members a chance to ask questions, but I certainly will allow you all the time you've been granted.

Thank you very much, Mr. Thomson. The floor is yours.

Mr. Ron Thomson (Chair, Canadian Copyright Institute): The Canadian Copyright Institute consists of over a dozen associations of creators and producers of copyright material, and a number of firms and a number of individual fellows interested in copyright issues. For the most part, we are interested in print material, but some of our members work in the area of audio-visual material.

The association represents many thousands of Canadians directly or indirectly through its membership or through memberships in the groups in the Canadian copyright industry.

I am chair of the association. I am normally a publisher at the Pontifical Institute of Mediaeval Studies in Toronto, a small university press. Ms Westcott is a member of the Ontario bar and is the executive secretary of the institute.

To us, copyright is the only economic right of creators and producers of intellectual properties, and it's only through a fair and adequate remuneration for the copying of their works that they can make a living.

In our submission sent in a month or so ago, of which I believe you have a copy, we have raised a number of specific points, a number of technical points, and I'm not going to repeat them in any great detail. I'm going to refer mainly to some broad issues of copyright and copyright protection, and focus mainly on the exceptions or defences to infringements that exist in the bill, although there are some other issues I'll touch on at the end.

What we see in the bill are answers to problems that existed approximately eight years ago when the so-called phase two discussions began. To us, we see a number of these problems no longer existing, and therefore the answers given in the bill are no longer relevant and in fact have deleterious effects.

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It has already been noted, and I'm sure you are well aware, that creators and producers of copyright material are among some of the lowest-paid people in professions in Canada. To protect their rights and their remuneration is one of the responsibilities of the Copyright Act.

Philosophically as well, in terms of the Canadian public policy, there has been a push over the last dozen years towards self-sustainment, towards creation of market income, towards creation of an industry that is supported on its own. Reflected in this are budgetary cuts that have affected creators through the Canada Council, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Medical Research Council, the Department of Canadian Heritage's publishing programs, provincial cuts to publishing programs and provincial cuts to higher education, which are reflected in universities' costs to support learned journals and books.

We do not see -

[Translation]

Mr. Leroux: Excuse me for interrupting you. Would you have a copy of your text for the interpreter because he's unable to follow you? It will be better when we solve the interpretation problem.

[English]

The Chairman: It's just to clarify the translation. We will give a copy of your French text to the translators so that they can follow you. Maybe you could speak a little slower so that Mr. Leroux can pick up the translation.

[Translation]

M. Thomson: I'm sorry, but I only have my notes in English.

The Chairman: Don't worry. I have a French copy here but I don't know whether it's the same text.

[English]

Mr. Thomson: We in the copyright industry do not see how, at the same time that the emphasis is on producers and creators of copyright material to pay their own way, Parliament can turn around and undercut those markets by granting wide-scale exemptions to some of our major markets.

There is a cost to using copyright material, and the cost comes in two areas: the fees or royalties charged and the transactional cost of paying those. Fees are very low when compared with the other costs. When you look at the collective licensing of schools, the standard cost across the country is $2 per pupil, payable to CANCOPY. This compares with approximately $1,600 per pupil paid to the teacher, and equally large sums paid in school budgets to caretakers, suppliers of tables and desks and even suppliers of legal services. We feel that $2 to cover the cost of the content of education is not an unreasonable fee.

The transactional costs used to be quite high, particularly for small-volume copying. With the cost of identifying the copyright owner, the cost of contacting it, the cost of paying that fee and the time lost in the process, it was obviously very expensive. With the changes eight years ago allowing the establishment of copyright collectives outside the music industry, we are and have been in a position to reduce these transactional costs to almost nil. We have responded successfully to Parliament's challenge eight years ago to develop a collective system for copyright management, and we feel that now is not the time to pull the rug out from underneath that.

For this reason, we have presented in our submission a list of necessary amendments to Bill C-32, especially affecting sections 29 and 30 of the Copyright Act, to protect writers and to channel copying through collectives, which is essentially the same as the commercial availability limitation on copying that is already there. You will see in our submission that a number of the exceptions allowing schools and libraries to do things except when commercially available, we also want to say, are available under licence from a collective society. This is the substitution that copyright owners are using for actually keeping large quantities of work in warehouses, in print, ready for sale.

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We are especially concerned about stand-alone copying machines, specifically as mentioned in section 30.3 of the Copyright Act. We feel it is not acceptable for libraries to provide mechanisms for illegal activities without adequate supervision. These are state-of-the-art machines, otherwise unavailable, and they are being used for illegal copying - more than just copyright infringement, but in many cases counterfeiting. We think the libraries must take more responsibility for placing these machines at the disposal of the public.

Libraries are actually encouraging illegal copying. The Metropolitan Toronto Reference Library this summer announced that it's replacing all its copying machines with new state-of-the-art machines designed to cover books. Since approximately 95% of the material in the Metropolitan Toronto Reference Library is copyrighted, they're obviously expecting a great deal of the copying on those machines is going to be infringement of copyright.

Libraries do see copying as a money-making process. My experience at my own institution indicates there is at least a 30% profit on the coin-operated copying done in libraries and similar institutions. That copying income, for instance, is the largest non-grant source of revenue for the Toronto Library Board. We are wondering who sanctioned the change from libraries as repositories of knowledge to libraries becoming publishers of knowledge, usurping income and paying none of the costs involved in that. We would like to see in the bill, and I've made suggestions for, either the elimination of this right to provide this opportunity for people to do illegal copying, or at least a fee involved in that area, a mandatory fee on those machines, so if we as copyright owners cannot prevent illegal copying, at least we can share in some of the library's profits from this revenue.

Finally, in your examination of the number of submissions you have had and are going to have on the access to intellectual property, basically focusing on the exceptions in proposed sections 29 and 30 and so on, we would like to remind you that there is a difference between knowledge being freely accessible and knowledge being accessible for free. I personally can walk into any grocery store in this country and not be discriminated against, not be barred from entering - there is no barrier to access - but when I select what I want from the shelves, I still have to pay for it at the checkout counter. We think copyright material should not be treated differently from this.

Some other points in our submission for your consideration. We support the Copyright Board as an independent arbiter of disputed issues. It's a safeguard for us all. It's a safeguard for us as copyright owners. It's a safeguard to our customers as copyright users. We like their role and we have made a general plea that the government as a whole increase the revenues and resources they have at their disposal in order to deal with all the issues that are now being placed on their table as a result of this bill.

We have made some comments on the registration system, which we see as serving no useful purpose and as being generally a waste of society's resources and time. We would like to see that section of the act eliminated. It's not in the bill as presented to you, but now is the opportunity to make that change.

I personally have sent you a brief on this issue. I'm not called here to speak on that, but it's in your material if you wish to consider it, and so are the reasons put forward for ending the registration system of copyright. I would only point out that this is one of the few jurisdictions in the world still retaining registration of copyright. Great Britain eliminated it around the First World War.

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Finally, specifically on collective societies, it's been pointed out that there is an unworkable element in proposed sections 67.1 and 70.11 in terms of defining the repertoire. You have to be aware that the repertoire of a collective society such as CANCOPY includes millions of items all over the world; it's a constantly changing repertoire. To expect something like this to be available for anyone to inspect is simply not possible. They have a system of exclusions that is available for exceptions, and the bill has to be rewritten in this area.

There are other technical amendments in our submission that we hope the government and the committee will adopt to make possible the functioning of the policies we recognize behind them. Otherwise many of these ideas are unworkable.

I would like to thank you on behalf of the Canadian Copyright Institute for the opportunity to bring these points to your attention. I'm quite willing to answer any questions you may have about what I've said tonight or about any of the points contained in the brief sent to you earlier.

Thank you.

The Chairman: Thank you very much, Mr. Thomson.

I'd like to turn it over to the members now. Mr. Leroux.

[Translation]

Mr. Leroux: First of all, I'd like to thank you for your presentation. I'm interested to know that you do recognize from the outset that creators' works should be accessible to everyone. This is one of the fundamental principles in your brief and you note the need to balance the needs of users and creators through appropriate recognition and remuneration. Accessibility does not mean that the work should be available free of charge.

I also note that you use some new terms in your brief. You replace the word ``exception'' by the term ``statutory defence''. You talk about collective societies as ``profitable mechanisms''. I'd like you to explain how in the present bill, which provides so many exceptions for education, museums, libraries and others, we can find statutory defences and a profitable mechanism. Would you explain this in relation to the 13 pages of concrete examples to be found in the bill.

In light of your experience, I'd also like you to indicate whether there really are circumstances where provision should be made for a statutory defence. I'd like to understand the link with the bill.

[English]

Mr. Thomson: The proposed section marked ``Exceptions'' is an outgrowth of what's earlier been called the fair use defence, or fair dealing.

When a substantial part of a copyright work is copied without permission, it is an infringement. What the acts have allowed since the turn of the century in fact is the accused infringer to offer as a defence the fact that this was for private research or study. The legislation recognized that.

These are similar infringements of copyright that the act is saying certain people may do and not be punished for. But they are still copyright infringements.

Infringement of copyright is the copying of a substantial amount of a protected work. What the bill is offering to certain people is the right to do that. We think the rights are too broad. We think some of the needs they have claimed are covered by paying very low fees, equivalent to what they would have paid if they'd actually bought the original material.

The act does say that when copies of the original material are available, say for a library that has lost a copy, they cannot copy that book. They have to buy a new one. We are saying they either buy a new one or pay the copyright element of the copying to a collective society, if that's available from a collective society.

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We are saying these defences that librarians or teachers could bring up for doing the copyright infringement are not necessary, because there are legal ways, commercial ways, in which they can do the copying properly.

So, for instance, we have asked that in proposed subsection 29.4(3) you insert after ``commercially available'' the words ``or available by licence from a collective society'', which limits the copying done in schools. Similarly, in proposed subsection 30.1(2), on libraries, we have asked you to insert after ``commercially available'' the words ``or available by licence from a collective society''.

Just because a work may have gone out of print, for instance, doesn't mean the rights are extinguished and doesn't mean the rights holders have no mechanism, through a collective society, for collecting on that. If the library or the school wants to go through the physical process of copying, that's fine, but they have to pay the intellectual property right element of that.

We have made available, through collective societies such as CANCOPY, a very cheap way of doing that. The transaction fees are virtually nil. One is only paying the copyright element, royalty, in there. Not only that, but the creators have even offered to pick up the transactional costs in so far as they are deducting from their royalties, from what they receive, the costs of administering the system.

The licensees, the customers, the schools, the libraries, the government - the Government of Canada has a licence from CANCOPY and provincial governments have licences for their civil servants - are all paying solely the royalty. The administration of it is being paid by the creators.

We are saying that's fine. We are willing to make this as easy as possible for you, but please let us collect the fees. We don't want to spend a lot of money on the telephone, Canada Post and all of these things in detailed transactions. We want to charge you only the royalties, but please pay us those royalties.

These exceptions or defences, whichever title you want - I think it's better to call them defences, but no one is going to go to the wall on that -

The Chairman: I think you must have really liked Mr. Leroux' question.

Some hon. members: Oh, oh!

The Chairman: We can give Mr. Leroux one more question, but please make your answer slightly shorter.

Mr. Thomson: All right.

[Translation]

Mr. Leroux: I'd like an answer to my second question.

From your experience, are there situations where statutory defence might be necessary? If yes, could you please give me an example. I'd also like to know whether there are exceptions.

[English]

The Chairman: In less than 15 minutes, please.

Mr. Thomson: Yes.

For instance, we're quite happy with the transitory copying of material onto blackboards or flip charts and things like that. That's fair enough; it's transitory. I know teachers are quite worried that if they copy a line from Margaret Atwood onto the blackboard, they might be charged with copyright infringement, but we're quite willing to have that.

For important material in a library that is lost and is not commercially available and is not available through a collective, yes, their right to go out and make a copy to maintain that library is fine. Yes, we see that.

We see certain needs of people with perceptual handicaps; we certainly recognize that. The creator industry and the handicapped communities are trying to work out the details of that now, in terms of guidelines to fit that section of the bill.

But the broad ability to copy anything you want just because there is an educational context or a library context, no, we don't see that as fair.

The Chairman: Thank you.

Mr. Abbott.

Mr. Abbott: What you touched on right at the end gets into the grey area, doesn't it? We talk about this line from Margaret Atwood that a teacher is going to write onto a blackboard, and then the next step of course is she's going to write it onto an overhead, and the next step after that is she's going to type it into her computer and produce an overhead, and the next step is she's going to copy the full page. It really is a grey area, isn't it?

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Mr. Thomson: Yes, it is, but what we're saying is that you can copy onto something that is either projected for transitory use. If she copies this on a computer and projects it on a screen in front of the classroom, once she turns the machine off, it's gone.

Mr. Abbott: And by the same token, if she made a photocopy of the page and projected that on the screen, once it's gone, it's gone.

Mr. Thomson: It's gone, that's right.

Mr. Abbott: There's a real problem. I think that virtually every Canadian will buy into the story that the vast majority of creators of work are basically scraping by. I'm not going to challenge that.

It does create a problem, then, for the library that is downloading. Whether we talk about B.C. with the NDP, Ontario with the PCs, or New Brunswick with the Liberals, there is that downloading from the provincial level - I'm not going to get into politics - to the municipalities and the schools, whereby the libraries are now looking at those photocopiers as being a profit centre. If I understood you correctly, you're saying that in an ideal world you would see the holders of copyright as having something of a claim on the profit from library photocopiers.

Mr. Thomson: I produce books and journals in my company. The sales of those have been going down worldwide as photocopiers have developed.

I wrote an article in a health magazine. I was offered the right to buy 600 offprints for distribution, which was the traditional way in which this material was sent around. Instead, I got 50; I've had 3 requests. The other 597 copies that used to go out there are being done on photocopying machines.

The effect of this is that the publisher and I are not getting any income from this. Therefore, the cost of producing the first copy, which is still high, is not being offset by the ability to sell copies.

One copy of a $10,000 book is $10,000, while 1,000 copies is $10. By cutting into this, publishers and creators are losing. We don't see why libraries should suddenly take material off of their shelves in which a great deal of money and effort has been put and then publish it and make a profit on it.

Mr. Abbott: I understand your argument. I'm not challenging your argument, because I think it's a valid one. I'm just saying that on the other side of the coin, the taxpayer who is seeing a 4%, 5%, 6%, 7% or 8% rise in his property tax is saying that this is good in theory but he just had a $400 or $500 hit on his taxes. That doesn't make it right. I'm just saying that there's the rub.

The real issue I wanted to touch on was this repertoire of a collective society. It strikes me that this is where there's a major friction, because you will have some authors, composers, and creators who are not interested in dealing with a collective society. On the other side of the coin, you have the end-user, who also is not interested in dealing with the collective society, because they say they're dealing with the author anyway. What is the resolution to that?

Mr. Thomson: First of all, when I have talked to authors about this, they have not been aware that they can exercise their copyright rights through a collective society and how it works. For instance, CANCOPY has really been only functioning at a very wide scale for the last two or three years. They are now finding, those who signed up early, that they're getting substantial revenues from this and they're seeing the advantage of it.

I have not yet met an author who is not interested in joining CANCOPY once they understand what it is all about, because they know that the copying is going on in the schools and libraries, and they're not getting a penny. People are not going to them to clear copyright. They're too difficult to find, for instance. Who knows where Margaret Atwood lives?

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I think that users on the whole are quite happy with a collective society because it's one-stop shopping. A society such as CANCOPY distributes money not only to people who have explicitly signed up with them, but also to other people who have been copied but who have not signed up with them. In actual fact, their repertoire is quite large because it includes a vast amount of foreign holdings.

The problem with the repertoire is this. I, as a person, sign my rights over to CANCOPY as an author. Every time I publish something, I don't inform CANCOPY of the title and the ISDN. They just know that they have the right to license everything by Ron B. Thomson.

Similarly, my publishing company does 10 or 12 books a year and has, from the past, a record of 300 or 400 titles. They're not all listed at CANCOPY. It would just take a huge amount of resources to do that. All they know is that a title that comes up under the Pontifical Institute is part of their repertoire.

So it's ridiculous for them to sit down and present something for browsing in the office for someone off the street. First of all, it would be incredibly large. It would command an incredible computer system just to hold it. It changes day by day. It's just impractical. All the money that is collected in copyright or royalties would go simply to maintain this imperfect list.

The Chairman: I understand that you, Mr. O'Brien, will share your time with Mr. Arseneault.

Mr. O'Brien (London - Middlesex): Fine, Mr. Chairman. I have several questions that I'm happy to share with my colleague.

Mr. Thomson, I seem to understand you to say that you support certain exceptions, or defences, as you prefer to call them. If that's correct, what criteria should we use in deciding whether an exception or a defence is warranted? Am I right in assuming that we're understanding you to say you support certain of those? What criteria would you suggest we apply?

Mr. Thomson: We feel that the transitoriness of the copying in schools is the essential element and, to some degree, the secrecy of examinations and testing, which would not allow pre-clearance, except as you know under a CANCOPY licence. There is a flat rate, period, so that the copying can be done under a CANCOPY licence anyway without prior authorization. So it's basically the transitory nature of that in the school system. Everybody else in the school system is paid, so why not the creators of the content?

In the libraries, it's basically the maintenance of the collection that we see as what they have to protect, which is damaged books and lost material. When a copyright owner cannot be located and is not handled by a collective society, yes, but when it's commercially available either direct from the original publisher or from a collective society, no.

Mr. O'Brien: I might pursue that, Mr. Chairman. I'm wondering how you see the administrative and financial impact of such exceptions or defences on both users and rights owners.

Mr. Thomson: The one collective society in this area that I know very well, CANCOPY, has attempted to make the functioning of this extremely simple. There's an annual licence, a set fee. You know ahead what you're doing. Making it $2 per student allows for spontaneously copying. It would be a bit higher at the university level. With transactional copies, you would know how much it is per page per copy for class handouts and so on and so forth. The copyright user knows ahead of time what's involved. The copyright owner knows that he or she is going to be compensated for the loss of revenue elsewhere by revenue from this point of view.

Mr. Arseneault: Mr. Thomson, I will just ask, without making too many comments in our limited time, some specific questions. First of all, with regard to the bill in general, what is the point of view of you and your group? Are you in favour generally of Bill C-32 as presented? I know you've asked for some changes and this and that, but in general are you in favour of the bill?

You and Mr. Abbott brought up ``or available by licence from a collective society''. Do you think this would resolve the issue for public institutions?

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The other thing you seemed to stress a little bit today is the photocopying issue at libraries and whatever. I'm wondering if you could table with the committee at perhaps a later date any financial information you have with regard to how much of that is going on and what type of financial impact this would have.

As well, are there any other countries that have statutory defences, and how would they compare with the ones in Bill C-32? Are they comparable or are they more strict here? Are they more lenient?

Mr. Thomson: Most European countries are stricter than we are. The Americans in their educational area are very wide open. They have essentially what they call ``fair use'', which has been interpreted by the courts to be very wide. It seriously undercuts the educational market in that country, because it is being used basically in the educational area.

We are for the most part happy with the bill itself. We do think there are some technical areas that were not worked out. You may remember that three years ago, when the Conservative government was attempting to write a bill, that there was a preview of it, and we did have a chance to make technical suggestions. It would have been nice to do that this time. But that is a different philosophy of writing legislation.

We do think, though, that what looks like fairly broad educational exceptions and library exceptions will seriously undercut the collective societies in this area. We already hear users saying they don't have to renew their licence any more because the bill gives them the right to do all of this stuff. Without going into expensive court cases to show that we don't think that's how the bill should be interpreted, we are being faced with that in getting our licences.

You must remember that in this area, unlike SOCAN, we have to negotiate licences. Although we are given, in other areas of this bill, to right to set tariffs, there are significant problems in going that route. We prefer the negotiation on both what is covered and the pricing as opposed to having the Copyright Board set that through our tariffs, etc.

So we do see the exceptions as much broader than they should be, and that it will have major economic effects on copyright owners if they go through as is, without the tightening up in the way we've suggested.

The Chairman: I think Mr. Arseneault also had asked for very specific information on whether you were prepared to supply figures with regard to copying and so forth. Could you address this briefly?

Mr. Thomson: I know of one survey on copying in libraries. I don't think it is privileged information. I do know it shows very high copying of copyright material. This survey of major libraries in Canada was done within the last six months. If possible, I will see that this gets to the committee.

The Chairman: If you don't get the survey itself, if you give the clerk of the committee the reference we can obtain it.

Mr. Thomson: I can see that you get the survey, if it's available. I'm sure it is.

There may have been some undertakings with the groups surveyed on the dissemination of the information from it. I have access to it from one of my positions, but it may not be available for public consumption without clearing it with the other side of the survey.

The Chairman: Then you will give the other party the statutory defence...?

Some hon. members: Oh, oh!

The Chairman: Are there any other questions for Mr. Thomson?

Mr. O'Brien: This may be very simple, but I have a quick, practical question, given what I've just heard. Education is my background.

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A teacher in a classroom wants to show a live broadcast of a major national or international event. Is it as simple as that, or are there some hoops person has to go through that would make it not possible to do that for the students? How do you see that situation?

Mr. Thomson: That section of the act allowing off-air taping and rebroadcasting in the schools has the news side and the non-news side. I don't think there are a lot of hoops they have to go through in terms of deciding whether or not to keep the tapes. I think on the news one, they get to use it for a certain time and then they have to destroy it or pay a royalty. On the non-news side, they have to decide whether to keep it, and pay a royalty if they show it. I don't think those are hoops that'll be a great deal of difficulty.

It'll become obvious to them fairly rapidly what very quick steps they have to take, who they have to pay, where they have to send the money and where they have to register. It'll be a simple form to fill out. Getting it in place won't be a problem.

Mr. Abbott: It raises a really fascinating question, though, doesn't it?

The Chairman: If it's fascinatingly short, yes.

Mr. Abbott: It's fascinatingly short.

If a television program is copyrighted, and the teacher's class is between 1 and 2 p.m. but the program was on between 11 a.m. and noon, if they could switch their class they could tape the program without any copyright infringement. But the fact that they're doing a time shift means they've run into a copyright infringement. Yet it's the same program and the same people. That's weird.

Mr. Bélanger: In some cases they can use it in schools.

Mr. Thomson: I believe they can broadcast in school. If they want to take the tape and show it at a later time, significantly later, for example, some world event right now that they want to show year after year as an example of that type of world event, then to keep that tape over time they'd have to pay a royalty.

The Chairman: Mr. Thomson, you're obviously very well informed about the subject you covered tonight. We appreciate it. You are certainly very articulate as well. I'm sure members appreciated your comments and your presence here tonight.

Thank you, and thank you, Ms Westcott.

Mr. Thomson: Thank you for letting us come.

The Chairman: Just before we adjourn, as you know, we had a briefing session set up for immediately afterwards. It's almost the time when the session was going to end.

I have a suggestion to make to members. Instead of a formal research session, as we had planned tonight, in view of the time and the flexibility we wanted to give to people appearing tonight, I have spoken to the two researchers who are ready to meet members as groups. In other words, they'll make themselves available to the Bloc Québécois, to the Reform Party and to the Liberals at a time convenient to various members.

If you agree - and you are the ones to decide this - I would suggest that each party get in touch with the researchers to set up a suitable time and place where we could meet to obviate the necessity for a formal meeting.

[Translation]

Mr. Bélanger.

Mr. Bélanger: Mr. Chairman, does that mean it can take place immediately if that is our preference?

The Chairman: Yes, for those who would like to but it depends on the two researchers. I think they are available.

Mr. Bélanger: Thank you.

The Chairman: Am I to understand that committee members would prefer to stay this evening?

An Honourable Member: Mr. Bélanger at least.

Mr. Bélanger: It's because I can't come tomorrow.

The Chairman: It doesn't necessarily have to take place tomorrow; it can be the day after tomorrow.

Mr. Bélanger: If it can take place this evening, that would be my preference. In any case we intended to remain until 9:15 p.m. and it's only 9:05.

The Chairman: That depends on our colleagues. It was arranged with our researchers that this would be a group briefing so that they didn't have to do it four times for the Liberal members and as many times for the Reform and Bloc members. So please try to come to an arrangement with your colleagues. In this particular instance, Mr. Bélanger, I have no objection.

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So we can have a briefing for the Liberal members, but if they'd prefer that take place on another day, then they should let us know.

[English]

Mr. Abbott, is that okay with you, then? You will be in touch with the researchers?

[Translation]

Mr. Leroux: We've come to an agreement among members of the Bloc. That's fine.

The Chairman: Thank you. What is your choice?

[English]

What is your choice?

Some hon. members: Agreed.

[Translation]

The Chairman: Mr. Leroux, you may leave.

[English]

The meeting is adjourned.

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